IBC changes for starting proceedings against corporate debtor valid: SC

New Delhi, Jan 19 : The Supreme Court on Tuesday upheld the constitutional validity of amendments to the Insolvency and Bankruptcy Code (IBC) in 2020, under which a minimum of 100 or 10 per cent of allottees of a housing project have to come together to file an application to initiate IBC proceedings against a defaulting developer.
A bench comprising Justices Rohinton Fali Nariman, K.M. Joseph and Navin Sinha held that Sections 3, 4 and 10 of the IBC Act, 2020 which introduced these amendments did not violate the right to equality under the Constitution. According to the earlier provisions, even a single allottee could initiate IBC proceedings against the developer.
The petitioners, many of whom were home buyers, argued that the law was created by way of pandering to the real estate lobby and succumbing to their pressure.
“Such an argument is nothing but a thinly disguised attempt at questioning the law of the Legislature based on malice. A law is made by a body of elected representatives of the people. When they act in their legislative capacity, what is being rolled out is ordinary law,” observed the top court in its 465-page verdict.
The petitioners have raised many practical difficulties in home buyers coming together to file a joint application against the corporate debtor.
The bench observed that insisting on a threshold on the categories of creditors would lead to indiscriminate litigation which would result in an uncontrollable docket explosion as far as the authorities which work the code are concerned.